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Automated Demand Response
and America’s Energy Future

  John J. "Jack" Mc Gowan, CEM
Energy Control Inc
Contributing Editor

Published in
Energy & Power Management

February Issue

If there is one thing that the wave of Internet-based e-business has taught us, it is that technology is more than fun and gadgets, it can help solve problems and bring other benefits including financial rewards. Technology has been used extensively over the years in the energy space, particularly with electricity. However energy management has always been something of a clandestine science. Over the last three decades dramatic savings have been achieved, but energy professionals have worked to reduce energy costs with a clear understanding that the local utility would prefer that they consumed more rather than less. This is not intended to paint electric utilities in a negative light, to the contrary utilities are in business to sell energy, and yet the industry has offered a wide variety of services to users from energy audits, to rebates that support energy management.

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Daily Peak LoadsThe real issue with energy management in the past, is that all of the efforts took place in a vacuum. Utilities had no way to know exactly how much efficiency and demand limiting was being implemented by owners, and, more importantly, they did not know when or if they would see a reduction in overall demand. The electric grid is a complex system and small changes may go unnoticed, therefore impacting the grid in a meaningful way is not unlike turning the proverbial battleship. From the utilities perspective electric demand is constant and unrelenting, as is evident from the California Independent System Operator Peak Load graphic shown here, compliments of the Demand Response Research Center discussed below. An exciting alternative to clandestine efficiency efforts is the next wave of energy management or what I call “holistic energy management”. The notion here is that technology, specifically interoperability throughout the electric system, is the key to allowing for an integrated approach to electric demand that includes both the utility and the user. Interoperability of this sort will make it possible for utilities and owners to effectively plan for, and react to, electric demand by using technology to implement an approach that is:

Predictable and

Of particular interest to me is the opportunity that this will create for a host of new business models in the energy space. The concept however is still a little abstract for many to embrace, which is where automated demand response (ADR) is fulfilling an exciting role. ADR is a viable early stage business model that is demonstrating right now, how an interoperable electric grid can leverage technology to bring dramatic value throughout the supply chain.

The Demand Response Coordinating Council (DRCC) has published this definition of ADR. ADR provides electricity customers in both retail and wholesale electricity markets with a choice whereby they can respond to dynamic or time-based prices or other types of incentives by reducing and/or shifting usage, particularly during peak periods, such that these demand modifications can address issues such as pricing, reliability, emergency response, and infrastructure planning, operation, and deferral.

Quite simply ADR allows users and utilities to work together to address one of the most critical challenges of the electricity business, peak demand. Just taking a look at the graphic depicting Cal ISO data for one year, several things become very clear. First it has summer peaking service territory and, based on the bar imposed on the graph, cooling is the major contributor to demand. A complicating factor is that US Department of Energy is projecting a 40% increase in electric demand over the next 20 years. ADR offers a way for utilities to hedge against how fast they will have to build infrastructure by offering an incentive to users that are willing to reduce load at critical times. Technology is the key to making this happen; building automation system can implement a wide variety of strategies to achieve the load reduction. A few of these strategies including pre-cooling before the demand period, using thermal storage and integrating combined heat and power or emergency generation to reduce electricity that is needed from the grid. With ADR, the incentives often take the form of money that can be used in part to pay for capital improvements that will support the demand response strategy, and in part can be taken in cash by the customer to reward their participation. The projected increase in demand will likely be driven in part by cooling, but also by the many aspects of our life style that require electricity. I was recently named Chairman of GridWise Architecture Council, which is sponsored by the US DOE Office of Electricity. The Council is exploring how information technology and interoperability can be used to improve both reliability and efficiency on the nation’s electric system or grid. Utilizing interoperability between computer systems on both sides of the meter has been demonstrated most successfully to date by ADR.

ADR is what you might call an energy “killer AP”, and it is becoming one of the hottest energy business applications. The term “killer AP” has been used a number of times in this column to describe what technologists call disruptive computer applications that revolutionize the way a specific task is done. This column reported nearly two years ago when the Department of Energy's Lawrence Berkeley National Laboratory completed its’ first successful test to evaluate ADR at five large building facilities in California. Since then the California Energy Commission's Public Interest Energy Research (PIER) program launched a Demand Response Research Center led by Lawrence Berkeley National Laboratory

Recently I had a very interesting discussion about ADR with Dan Delurey, Executive Director of the United States Demand Response Coordinating Committee. We were attending a planning session for GridWeek, a DOE sponsored series of events to be held in Washington DC in April, which promises to be the “grid” event of the year in 2007. Dan shared with me that his organization has held a number of Demand Response Town Meetings that have been very well attended. There has been growing adoption of ADR by utilities across the country. This has created business opportunity along with other near-term benefits in enhancing grid reliability and hedging against the near term need to build infrastructure. Mr. Delurey noted that a number of unanticipated benefits have been identified. He said that one Northeast think tank shares his view that ADR can offer environmental benefits by reducing demand at critical time periods and keeping the least efficient plants with the most dangerous emissions from operating. It is hardest to achieve Sulfur Dioxide and Nitrogen Oxide attainments during demand periods, thus implementing ADR to reduce load can bring real value.

Utilities are increasingly seeing demand response as a good strategy for them because they are engaged and involved in the entire process. An example of this acceptance was pointed out to me recently by David Brewster, President of EnerNOC, who shared that his company has seven percent of the peak demand for the State of Connecticut “demand response – enabled”. Ultimately GridWise envisions an information technology infrastructure for the electricity business that will allow for an energy marketplace, which can have the same type of impact on this industry as “just-in-time” has had on manufacturing. Though ADR is a near term application that demonstrates true success of this type, it will very likely be the first of many applications that leverage interoperability to create technology driven business models to optimize the electric grid. As the demand for electricity continues to grow in conjunction with other challenges that the industry faces, new technology can be invaluable in helping the industry deploy the optimal mix of generation, transmission and distribution to serve diverse and expansive markets for power. Implementing a “Smart Grid”, or what Al Gore calls the “Electranet”, see Newsweek Magazine, December 18, 2006, will be essential. Information technology has revolutionized education, business and entertainment; it is only a matter of time until it has the same impact on electricity.

About the Author

Mc Gowan is President of Energy Control Inc., an Energy Service Company and System Integrator. He is an author and has published 5 books including “Direct Digital Control” on Fairmont Press. The Association of Energy Engineers named him “International Energy Professional of the Year” in 1997 and admitted him to the “International Energy Managers Hall of Fame in 2003. Mc Gowan is Chairman of the U.S. Department of Energy GridWise Architecture Council. He also sits on the Energy and Power Management Technical Advisory Board and is a Contributing Editor with


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